Hi Rich and thanks for posting rather than e mailing. sorry it took me a couple of days to get back. Unlike the armchair quarterbacks in the peanut gallery, I had work to do- had to chainsaw up a bunch of brush at that Mattawan 3 unit. I think the funniest one was suggesting that I buy a ‘guru’ course. Why so I can become a glassy eyed zombie, without having an original though ever again? I agree with your assesment (paradigm). Any hoo- will be closing on it the 4th and walk out of closing with about $12K equity. Cash flow will bite the first year, paying off the sellers note ( I’m only gaving him $2K cash at close), but will really kick in year 3 when I re fi, and that is figuring at $50 per unit under market for safety sake. Will have the second lot free and clear and about $400/mo. positive cash flow. My step son the contractor offered already to build a spec house there. Will probably take him up on it. Drop me a line if you’re coming out this way. best, Scott
I have just recently come across your site and am delighted to see that people/investors are really doing this stuff outside of what I see on the infomercials.
I been investing in real estate for about 8 years now and have had successes in purchasing propeties from auctions held by Sheldon Good and Co and HUD. I have purchased 5 properties at 40-60% below market value using standard mortgage loans. Two of the properties I sold netting 120K
and the others I am renting garnering a healthy monthly cash flow.
Being these type of private auctions are becoming rare and hard to come by. I would like to delve into more creative means of property aquistions.
I have been reading through the success stories and have one question. If I were to “contract” with a seller to purchase a property by “stepping in” and taking over their mortgage payments and passing through note payments to the bank. How should the contract be structured to prevent the seller from selling the property subsequent to me aquiring it and beginning pay down on the note on the agreed upon terms.
What legal rights do I have to prevent this sort of situation ? Any thoughts on this would be appreciated.
Posted by Julia (NJ) on August 21, 2003 at 16:53:45:
I haven’t done a subject to deal yet, just been reading a lot! The way that I understand it works is that the seller actually deeds you the prperty, and you take over the payments. You record the deed and are the owner of record, therefore, it is not possible for the seller to sell the property “out from under you”.
Not quite that simple. Search “subject to” and “Sub 2” in the archives. You should have a land trust set up with you named as the trustee. Get the deed. Then you do not record the deed until you are ready to sell.
Don’t record the deed? Are you crazy? Your deed won’t show up on a title search if it is in your desk. You record the deed. You do not record the land contract.
Another thing, you are NOT the trustee. If you are the trustee, and hold beneficial interest, there is no trust. Trustee must be someone you trust, and NOT you.
Finally, aside from factual inaccuracies, your post is WAY simple, and you’ve left out about a dozen other documents and steps to do these correctly, and be protected. Some people do them a little different, but not like you described. Well, they might, but they’d be accomplishing nothing.
that out of the 1000’s of people who read this newsgroup every day, that you are the only one who chose to nit-pic it. Direct from Bronchick’s article: Step 1:" Sammy Seller signs a trust agreement with YOU as trustee of his trust. Sammy is named as the "beneficiary’ of the trust. " Step 2 Sammy Seller transfers title to the trustee (no violation of the ‘due on sale’ clause) Step 3. Sammy Seller quietly asigns his interest under the trust to you (simular to a transfer of stock in a corporation). THIS ASSIGNMENT IS NOT RECORDED IN ANY PUBLIC RECORD (emphasis mine)Sammy moves out and you move in.
Now I put it to you JS: How is interest in a property conveyed? Through a deed! If there was no deed, it would cloud the title and any title insurance would insist in that paper trail when you go to sell wouldn’t it? I did give the poster an adequate answer, since I encouraged him to study previous posts and read the article I just quoted, so you objection is unwarrented. Interesting that you didn’t do so to the original respondant.
I nit-pik when you give someone incorrect, and terrible advice, so they don’t then end up in front of a judge. Sorry to offend you by sugggesting that there is a right way, and a wrong way.
rm correctly pointed out that you said you don’t record the deed. 5 other people pointed out the right way to do it as well. Sorry we’re all such a bunch of nit pickers, and care to correct inaccuracies.
Didn’t mean to get your feathers ruffled, just trying to help out the original poster.
Posted by Mike (MI) on August 22, 2003 at 07:22:18:
I think you are misunderstanding something here. The Deed to the Trustee definately gets recorded. What does NOT get recorded is the “Assignment of Beneficial Interest” in the trust.
Please read your post and the part you emphasized and I think you will see what I am saying.
Bottom line for all is this: If you do not understand the mechanics of a Sub2 deal, then don’t do one. Buy a course from a guru (Bronchick, the Frances, etc…) and make sure you have all of the necessary docs and protocol done.
Investors who run with a concept without understanding the mechanics usually end up making a mess of things. They are also the ones that give the serious investors a bad name by not doing their dd and having the transaction end up ugly for everyone involved.
>Not quite that simple. Search “subject to” and “Sub 2” in the archives. You should have a land trust set up with you named as the trustee. Get the deed. Then you do not record the deed until you are ready to sell.<
Sorry Mike, but I think it was you that misread my last post. Of course you record the deed to the trust. What I said, and still maintain, is that there should be a second un recorded deed for the assignment of benificial interest. Interest in a property should be transfered by a deed. At least that’s how us country bumpkins with 130 hours of class time, a state exams, and 5 years with a license, and another 6 years as an investor before that, do it.
rather than instant condemnation. I read this entire thread Scott and though your first post was worded poorly, I understood what you were trying to get across, and it may have merit. I think that some people are stuck in their paradigms, and if nothing else, it might be worthwhile to get both documents and cover all bases. Regards, Rich
to admit you don’t understand trusts nearly as well as you thought you did. Don’t feel bad though… I know someone who sells a SUB2 course that thinks it’s okay to be a beneficiary AND trustee. I feel for the recipients of his lame advice.
Scott, beneficial interest in a trust is not real property, thus you do NOT transfer it with a deed. You said above that interest in a property should be transferred by a deed…correct! But when assigning beneficial interest you are assigning interest in a TRUST, which is not real property. The trust just happens to own the real estate.
BrokerScott You have it wrong - Posted by Rick(MD)
Posted by Rick(MD) on August 22, 2003 at 14:57:07:
Consider the possibility that you don’t fully understand the proper way to do this. You may have been licensed five years but the way you explain the process is wrong. After the property is deeded to the trust, the assignment of beneficial interest is NOT DONE with a deed. It is a simple assignment (notarized).